World 05.02.2024

The history of Burger King's tough brand policy

Source: kapital.kz
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In 1954, entrepreneurs James McLamore and David Edgerton founded Burger King in Miami. In five years, they have successfully expanded their network from 5 restaurants nationally. By 1967, when the company was sold to Pillsbury, Burger King was already the third largest chain in the United States and soon became second, second only to McDonald's, a position that remains true to this day.
The history of Burger King's tough brand policy

McLamore and Edgerton started their business with a simple concept aimed at attracting families enjoying their lives after World War II. The Burger King chain became part of the population boom, attracting more and more customers. At that time, cutlery was introduced, albeit made of plastic, which was unusual for fast food.

At the same time, in California, entrepreneur Ray Kroc launched the famous McDonald's restaurant chain by making a deal with the McDonald brothers. In 1957, Burger King expanded its menu by introducing the legendary Whopper hamburger, the equivalent of McDonald's Big Mac. Burger King also set uniform prices throughout the country, not raising them even during crises.

The price of a hamburger at all chain restaurants was 18 cents, while a Whopper cost 37 cents (it's worth noting that McDonald's hamburgers were cheaper at 15 cents, but Burger King has always maintained the tradition of being slightly more expensive than its competitor McDonald's).

By 1959, Burger King's founders, McLamore and Edgerton, realized they were ready to expand their business beyond Florida. They chose franchising as a development model, which has since become a popular tool for business expansion in the restaurant industry. By selling the rights to open Burger King restaurants, they covered large territories, unlike McDonald's, which provided rights including small territories, even to small family-owned businesses with one restaurant.

This franchising strategy led to the chain's rapid growth, and in 1967, McLamore and Edgerton decided to sell the Burger King company to Pillsbury for $18 million, receiving that amount for the chain's 274 restaurants.

In the late 1960s, the Burger King franchise chain of restaurants faced problems due to insufficient organization of checks on the compliance of franchisees with the general standards of the chain. Edgerton and McLamore did not provide a consistent level of service across different Burger King restaurants, resulting in some variation in the quality of service and food offerings. This was a major setback for a chain that emphasizes consistent customer service at any of its restaurants.

At the same time, some Burger King franchise partners expressed interest in buying out the entire chain. An entrepreneur named Trotter, along with his partner, approached Pillsbury with several deals to buy Burger King. Having failed to achieve agreement, Trotter began acquiring franchises, buying them fr om the actual owners, thanks to the right to resell the license provided for in the agreement with Burger King.

It should be noted that Pillsbury rejected a $100 million offer for Burger King. Ultimately, the company even sued Chart House (Trotter's enterprise) in connection with the purchase of franchises. Ultimately, the lawsuit was decided in Pillsbury's favor, ending Chart House's attacks on the company.

In 1969, Burger King introduced its famous logo, which remained in use until the early 1990s. The logo was designed to reflect the restaurant's connection to hamburgers. The original version featured an orange sandwiched between two yellow semi-circular buns. By 1994, Burger King modernized the logo, making the font smoother and rounding the edges. These changes in font design replaced the outdated raised style to meet advertising requirements.

Real franchisee management at Burger King intensified following the transfer of experienced manager Donald Smith to the company from McDonald's. Despite the fact that McDonald's was at that time growing more actively than Burger King, Smith was attracted by the freedom of action given to him at Burger King. From this point on, Burger King tightened its control over its franchisees, emphasizing standardization throughout the chain.

When Donald Smith joined Burger King, he encountered a problem that he could not have imagined while working at McDonald's. The company owned only 34% of the land on which its restaurants were located. Smith recognized that this was a key factor affecting the quality of franchisees and their adherence to standards. Since Smith's arrival, Burger King's franchising model has undergone significant changes.

Burger King preferred to enter into agreements with individual entrepreneurs, avoiding cooperation with large companies. The company actively prevented the emergence of large franchisees, focusing its efforts on attracting small entrepreneurs. Additional requirements were introduced for franchisees, including mandatory residence within a certain radius from the place of work. Regional offices were also created, responsible for monitoring, supporting and controlling the work of franchisees.

Each franchisee entered into a contract prohibiting the acquisition of a franchise in another territory. This meant that it was impossible for a restaurant owner in New York to purchase a Burger King franchise in California. In case of violation of this condition, the company under the leadership of Donald Smith took legal steps and successfully won cases, since such restrictions were clearly described in the contracts.

Under Smith's leadership, Burger King began aggressive international expansion, appearing in 30 countries within the first 10 years. In 1974, all Burger King restaurants introduced a new speedy service system. Smith himself reorganized the company, drawing on personnel from his previous experience at McDonald's. A mandatory two-day annual inspection of each franchisee has been introduced, supplemented by unscheduled secret inspections at any time.

During the 1980s, Burger King aggressively expanded its offerings, introducing many new products, including the successful introduction of breakfast products, adapting to trends seen at McDonald's.

In June 1980, Donald Smith left Burger King, directing his efforts to create a new fast food restaurant chain, Pizza Hut. The following years were a period of instability for Burger King, with frequent changes in leadership, which negatively affected the overall atmosphere of the company and its strategic goals.

In 1985, the company opened a training center in London, strengthening its cooperation with European franchisees. At this time, the assortment was also expanded, full-fledged salad bars were introduced and the offer of healthy food was increased. Changes also affected the interior of restaurants, wh ere the use of plastic was reduced in favor of safer materials such as wood. Computerization and standardization of cashiers' work have speeded up processes and made work accessible to teenagers.

Despite standardizing its services and operating style, Burger King has not yet reached the level of McDonald's. The problems of the previous period remained in the past, but the company successfully launched aggressive advertising campaigns, such as the famous "Battle of the Burgers", which contributed to a remarkable increase in sales by an average of 19% after its launch.

In subsequent years, Burger King's advertising campaigns did not achieve the same success, and several of them, including those that used celebrities, were failures. In 1989, Grand Met acquired Pillsbury along with the fast food chain Burger King for $5.7 billion. This deal was successful, despite some problems, and brought Grand Met 5.5 thousand restaurants in 50 countries around the world.

Burger King's new owner, Grand Met, has made its first move by appointing Barry Gibbons, an experienced manager of the UK pub chain, as CEO. Immediately after this, Burger King acquired the Wimpey hamburger chain, strengthening its position in the market. By the summer of 1990, 200 Wimpey restaurants had successfully converted to Burger King.

The early 1990s saw a significant expansion of the company's influence overseas under CEO Barry Gibbons. In addition, the company entered into a successful agreement with the Disney studio, which lasted 4 years, after which the studio chose to cooperate with the more child-oriented McDonald's.

In 2002, the company's owners, including TPG Capital, Bain Capital and Goldman Sachs Capital Partners, took Burger King public. By the end of 2010, the Brazilian company 3G Capital acquired a majority stake for $3.26 billion and began restructuring the company to improve it. 3G Capital later merged Burger King with Canadian fast food chain Tim Hortons, forming a major corporation.

By the end of fiscal 2013, Burger King operated 13,000 restaurants in 79 countries, with 66% of them in the United States. In 2013, the company moved to a full franchise model, transferring the management of 99% of its restaurants to private franchisees. Company expansion has traditionally been accomplished through various forms of franchising, and licensing methods may vary by region.

In 2014, 3G Capital announced plans to acquire Canada's Tim Hortons and merge it with Burger King. After the merger, both networks continued to operate independently of each other. Burger King remained at its Miami headquarters, while Tim Hortons looked to leverage Burger King's resources for international growth. The combined company became the third largest international fast food restaurant chain.

According to 2016 data, Burger King has more than 15 thousand locations, serves more than 11 million visitors per day and is the second largest seller in the United States, second only to McDonald's.

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February 2024
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